Filings for unemployment insurance fell last week as the government’s boost to UI payments expired nationwide.
Initial jobless claims totaled 310,000 last week, the Labor Department announced Thursday. Economists surveyed by Bloomberg expected filings to decline to 335,000. The print marks a second straight decline and places claims at a new pandemic-era low.
The previous week’s count was revised to 345,000 from 340,000.
Continuing claims, which count Americans receiving unemployment benefits, declined to 2.78 million for the week that ended August 28. That landed above the forecast of 2.73 million claims and marked a sixth straight pandemic low.
The latest claims data covers the last week before enhanced unemployment benefits lapsed. The federal government had been supplementing states’ UI payments with a $300-per-week benefit since the American Rescue Plan was approved in March. That boost expired on September 6, leaving about 7.5 million jobless Americans with less support as virus cases soared higher.
The pullback in UI support comes as claims sit at historically elevated levels. Jobless claims are still well above their pre-pandemic trend of 200,000, and continuing claims need to drop by another million to return to their past average.
The cutoff didn’t affect every state at once. Twenty-six state governments had already pared back the supplement prematurely, with many arguing the move would push more Americans into the workforce. Yet research suggests the early pullback in UI support harmed local economies more than it helped. Analysis from The Wall Street Journal found “roughly similar job growth” in states that did and did not end benefits early. And Homebase researchers found that employment actually fell in states that slashed UI ahead of schedule.
The Biden administration has said that states can continue to provide boosted UI payments on their own with leftover funding from the American Rescue Plan. Yet no state has committed to taking such action, Insider’s Juliana Kaplan and Joseph Zeballos-Roig reported, and it’s unlikely Democrats can pass another salvo of enhanced UI.
The number of Americans filing for unemployment insurance fell last week, reversing the previous period’s climb and reaching a new pandemic low.
Weekly jobless claims totaled an unadjusted 340,000 last week, the Labor Department said Thursday. The median estimate from economists surveyed by Bloomberg saw claims sliding to a pandemic low of 345,000. The reading places claims at the lowest level since March 2020 and marks the second decline in three weeks.
The previous week’s total was revised to 354,000 from 353,000.
Continuing claims, which track Americans receiving unemployment benefits, slid to 2.75 million for the week that ended August 21, according to the report. That came in below the median forecast of 2.81 million claims. It also marked the fifth straight pandemic low for continuing claims.
The latest claims data covers the second-to-last week before the federal boost to unemployment benefits lapses. The government’s $300-per-week supplement will end on September 6 for the 24 states that haven’t cut the benefit early. While states prematurely ending the boost have argued the move would push more Americans into the workforce, several studies have since suggested the early cutoffs hurt local economies and did little to accelerate hiring.
The cancelation will also come while claims remain historically elevated. Weekly counts are still well above the pre-pandemic average of 200,000, and continuing claims need to fall by another million before meeting the pre-crisis norm.
In other labor-market news, hiring in the country’s private sector badly missed expectations in August. Private payrolls rose by 374,000 last month, ADP said in its monthly employment report. While the print marks a small uptick from July payroll growth, it fell well short of the 613,000-payroll forecast.
Hiring was likely dented by the surge in Delta cases and reinstatement of some mask-wearing rules. Daily case counts ended August at the highest point since January, when the virus’s winter resurgence was in full swing. The rebound in cases also cut into Americans’ hopes for the recovery, which likely slowed the recovery further.
“The Delta variant of COVID-19 appears to have dented the job market recovery,” Mark Zandi, chief economist of Moody’s Analytics, said in the ADP report. “Job growth remains inextricably tied to the path of the pandemic.”
Still, forecasts for the government’s nonfarm payrolls report remain promising. Economists expect the Friday jobs data to show 750,000 jobs added, and for the unemployment rate to slide to 5.2% from 5.4%. July’s jobs report trounced forecasts after ADP’s missed expectations, leaving a positive surprise in the cards for Friday morning.
People line up outside Kentucky Career Center prior to its opening to find assistance with their unemployment claims in Frankfort, Kentucky, U.S. June 18, 2020.
Bryan Woolston/Reuters
US jobless claims jumped to 353,000 last week, just above pandemic lows but the first increase in five weeks.
Economists had expected claims to rise slightly to 350,000.
Continuing claims fell to 2.86 million, but fell short of the 2.76 million claims estimate.
Filings for unemployment insurance jumped from pandemic-era lows last week as the country crept closer to the expiration of federal UI aid.
Weekly jobless claims reached an unadjusted 353,000 last week, the Labor Department announced Thursday morning. That compares to a median estimate of 350,000 claims from economists surveyed by Bloomberg.
The print interrupts four straight weeks of declines. The previous week’s count was revised to 349,000 from 348,000 and still marks the lowest reading since the pandemic drove claims higher.
Continuing claims, which count Americans actively receiving unemployment benefits, fell to 2.86 million for the week that ended August 14. That missed the median estimate of 2.76 million claims. Continuing claims set a pandemic low that week and have generally declined more consistently than weekly claims.
While claims sit far lower than they did just months ago, they remain nearly twice their pre-pandemic levels. Weekly counts have been among the most closely watched indicators of the labor market’s recovery, despite their volatile nature.
The latest reading also comes mere weeks before the federal boost to UI lapses. A handful of programs created by Congress have augmented weekly benefits payouts since the pandemic began early last year, but they’re set to expire in September. The Biden administration reiterated earlier this month it would let the programs expire, and Democrats are unlikely to extend the benefit further.
Twenty-six states announced plans to prematurely slash the benefit, with many arguing the move would push more jobless Americans into the workforce.
Yet a new study suggests the early cuts did more harm than good. Researchers at University of Massachusetts Amherst, Harvard University, Columbia University, and University of Toronto found the reduction of benefits drove a 20% drop in recipients’ weekly spending and did little to improve hiring, with only 4.4% more workers in early-out states taking jobs compared to peers in states that kept benefits.
“Clearly, if it had been the case that more people losing benefits were easily able to transition into paid work, you wouldn’t see that sort of reduction and sharp reduction in spending, but that’s what you saw,” Arindrajit Dube, an economics professor at UMass Amherst and of the paper’s authors, told Insider’s Juliana Kaplan.
The Brookings Institute joined some Democrats and millions of unemployed Americans on Wednesday in arguing for an extention of the federal support. There is little evidence the boosted benefits are behind the labor shortage, Annelies Goger, a fellow at Brookings’ Metropolitan Policy Program, said in a report. The premature cutoff also stands to worsen economic inequality at a time when the recession’s fallout is already extremely uneven, she added.
“This return to ‘normalcy’ will penalize many of the workers who the pandemic impacted most severely,” Goger said.
For several months during the pandemic, the labor market lagged other gauges of economic health.
As manufacturers rebounded and Americans spent their stimulus checks, hiring remained stagnant, falling short of a V-shaped recovery as COVID-19 cases surged during the winter.
This was seen in payroll growth – perhaps the most closely watched monthly indicator – which slowed in the fall and even turned negative in December amid increased restrictions. And new filings for unemployment, while down from their early 2020 highs, stayed elevated.
But then came March, and the literal green shoots of spring were accompanied by the figurative indicators of economic recovery.
US payroll growth saw its biggest jump since August, while the unemployment rate declined to a fresh pandemic-era low. The progress has prompted Wall Street titans to adjust their forecasts higher to reflect several months of robust job gains.
Data published Thursday added to the encouraging outlook as jobless claims fell to a pandemic-era low. And with more Americans returning to steady employment, spending – a key driver of economic growth – stands to swing higher.
“The economy, at this point, does seem to be at a bit of an inflection point,” Federal Reserve Chair Jerome Powell said Wednesday, adding that the March jobs report shows what faster growth can look like.
Where hiring accelerates, so does spending
A rapidly healing labor market can be exactly what shifts the recovery into a higher gear. Employment, and the steady income that comes with it, leads Americans to spend more. That spending leads businesses to hire more as they look to service stronger consumer demand.
Consumer spending accounts for roughly 70% of economic activity, and the nature of the coronavirus recession made sales data even more relevant to tracking the recovery. Lockdown measures kept Americans from spending at physical retailers, and the record-high unemployment rate seen at the start of the crisis also cut down on activity.
The government filled in some of the hole with its unprecedented stimulus packages. Retail sales – a popular proxy for overall spending – soared 7.6% in January as people deployed $600 direct payments included in President Donald Trump’s stimulus bill.
That dynamic repeated itself last month. Retail sales surged 9.8% in March to the highest level on record, the Census Bureau said Thursday. The increase is widely attributed to Democrats’ $1.9 trillion stimulus measure, as well as faster vaccination, warmer weather, and relaxed business restrictions.
“The payments were two-and-a-half times bigger than in January, so the consensus forecasts always looked timid,” Ian Shepherdson, chief economist at Pantheon Macroeconomics said, adding sales should rise again in April before trailing as Americans shift spending to non-retail outlets.
Higher employment can also replace stimulus as a steadier boost for spending. While stimulus does swiftly drive spending higher, most of the direct payments go toward saving and paying down debts, according to Federal Reserve research. Last month’s sales data also suggests the stimulus bump fades quickly. After spending jumped in January, it declined 2.7% the following month. Employment, on the other hand, provides the means for more stable consumption.
Economists already incorporated the stronger spending and jobless claims data into their outlooks. JPMorgan’s forecast for March GDP leaped to 1.6% from 0.7% growth, according to its nowcaster model. The firm’s first-quarter growth estimate rose to 4.5% from 3.5%.
The cost of an upward spiral? Inflation
But with stronger consumer demand comes inflation. Price growth has become the indicator to watch as the country edges toward a full recovery. Those opposed to Biden’s spending plans have warned of rampant inflation fueling a new economic downturn. Others view the administration’s stimulus as necessary to avoiding the plodding recovery seen after the Great Recession.
Indicators signal stronger inflation is at the country’s doorstep. The Consumer Price Index – a commonly used gauge of price growth – gained more than expected last month amid the spending surge. To be sure, officials including Fed Chair Powell and Treasury Secretary Janet Yellen have said they expect stronger price growth to be temporary.
But years of elusive inflation dynamics suggest the central bank and the Biden administration have a looser grip on price growth than they’d like.
“Economists don’t fully understand why we’ve had low interest rates and low inflation in the last decade. And that’s problematic because we don’t know under what circumstances that will change,” Laura Veldkamp, professor of economics and finance at Columbia University, told Insider. “The risk is, this is a ton of spending that … will trigger a bunch of inflation. And those high interest rates will mean that this new debt we’re taking on is going to become incredibly expensive to service.”
The MSCI Index’s broadest gauge of global stocks edged up 0.05% in early European trade, just slightly lower than Thursday’s record peak.
Futures on the Dow Jones, S&P 500, and Nasdaq whipsawed between gains and losses, suggesting a mixed open when US indices start trading later in the day.
US jobless claims for the week through April 10 fell to 576,000, beating economist expectations of 700,000. That is the lowest unemployment figure since claims soared at the start of the pandemic.
Outperformance of technology stocks led the Nasdaq to gain 1.31% on Thursday, taking it to within half a percent of its record close. Yield on the 10-year Treasury fell 11 basis points on Thursday, before bouncing back to 1.58%.
Key figures released by Chain’s statistics bureau pointed to a continued rebound, but they are perhaps unusually strong in comparison with last year, when the economy contracted in response to the pandemic.
UBS said while investing at all-time highs may be daunting for some, it expects more upside ahead and predicts the S&P 500 could end the year at 4,400, roughly 5% higher than where it is right now.
“As the economic reopening accelerates in the coming months, we believe the bull market remains on a solid footing,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We maintain a cyclical bias and prefer US consumer discretionary, energy, financials and industrials. We also retain our preference for value versus growth, as well as for small- and mid-caps over large-caps.”
Elsewhere in Europe, the head of Germany’s disease control agency said people need to drastically reduce contact to curb a third wave of coronavirus infections. Cases in the country were up by 31,117 on Thursday – the most since mid-January.
London-based research company Airfinity announced 1 billion doses of COVID-19 vaccines have been made so far. It forecasts the world could produce another billion doses in the next month alone as production ramps up.
London’s FTSE 100 rose 0.4%, the Euro Stoxx 50 rose 0.3%, and Frankfurt’s DAX ignored the health crisis in Germany and rose 0.5%.
Asian markets traded higher on the back of strong Chinese data.
“With the recovery happening as expected, the market anticipates that monetary policy will be normalized, and liquid margins tightened,” said Lynda Zhou, a portfolio manager at Fidelity International. “Overall, market sentiment remains fragile as it tends to react slowly to positive news and quickly to negative news.”
The number of Americans filing for unemployment benefits declined more than expected last week, signaling the labor market recovery is still recovering, albeit at a modest pace.
New jobless claims reached an unadjusted 730,000 for the week that ended Saturday, the Labor Department announced Thursday morning. Economists surveyed by Bloomberg expected the reading to come in at 825,000 claims. Last week’s total is also below the previous period’s revised count of 841,000 claims.
Continuing claims, which track Americans currently receiving unemployment benefits, dropped to 4.4 million for the week that ended February 13. Economists projected continuing claims to decline slightly to 4.5 million.
While down significantly from spring 2020 levels, jobless claims wavered around 800,000 for weeks amid slowed hiring activity. Weekly counts still exceed the 665,000 filings made during the worst week of the financial crisis. And the roughly 80 million claims made since the pandemic hit the US is more than double the 37 million filings seen during the previous downturn.
Labor-market indicators haven’t fared as well as some other economic data in recent weeks. Retail sales leaped 5.3% in January, according to Census Bureau data published last week, trouncing the 1% gain expected by economists. The data signals stimulus passed by President Donald Trump late last year efficiently lifted household spending during one of the worst months of the pandemic.
More recently, IHS Markit reported US business activity improved the most in almost six years in a preliminary February reading. The firm’s index of output across the service and manufacturing industries rose 0.1 point to 58.8, marking the strongest rate of growth since March 2015. The bulk of the improvement came from the service sector, while the manufacturing industry continued to expand at a relatively strong pace.
Pandemic data has similarly shown encouraging trends. Daily case counts are less than a third of their early January peak, and hospitalizations have also steadily declined. The US is administering 1.3 million vaccines per day on average and has so far administered 65 million doses, according to Bloomberg data.
The recovery is set to receive a boost from Washington in the coming weeks. House Democrats on Wednesday indicated they’ll hold a floor vote on President Joe Biden’s $1.9 trillion stimulus proposal on Friday. The legislation would then be sent to the Senate, where Democrats aim to pass the bill through budget reconciliation and send it to the president’s desk by March 12.
That timeline would allow for expanded unemployment benefits to continue instead of expiring on March 14. The package also includes $1,400 direct payments, aid for state and local governments, and an increase of the federal minimum wage to $15 an hour.
